It will shift to Deutsche Telekom after revelations about NSA eavesdropping

The German government is dropping Verizon Communications as a service provider because of worries about U.S. spying.

The government will shift all services provided by Verizon to Deutsche Telekom by the end of 2015. It had been reviewing its communications contracts already, but concerns about possible spying by the U.S. National Security Agency helped to tip the scales against Verizon, the German Federal Interior Ministry said Thursday.

Germany's move is the latest evidence that revelations about NSA eavesdropping are damaging U.S. companies' overseas business.

Verizon provides Internet access to some German federal agencies and helps to run a network that links them. The government's contracts with Verizon had been exposed recently in the media and caused an uproar because of reports of NSA eavesdropping on foreign leaders, including German Chancellor Angela Merkel. Those reports, based on information disclosed by former NSA contractor Edward Snowden, brought additional scrutiny to Verizon's government contracts.

Asked on Friday if the switch was made because of ties between Verizon and the NSA, Interior Ministry spokesman Tobias Plate said: "That's not the case, it's just that the NSA issue made the federal government think about network security and how to improve things."

"We don't have any comparable contracts with any other U.S. service providers," Plate said, adding that the government is not renewing other contracts, and that he didn't know of any such contracts with other non-German providers.

Verizon said it had done nothing wrong.

"Verizon Germany is a German company and we comply with German law," said Detlef Eppig, Managing Director of Verizon Germany, in a prepared statement provided by Verizon. The U.S. government cannot access Verizon customer information stored outside the U.S., he said, pointing to a Jan. 24 Verizon blog entry.

Last month, Cisco Systems CEO John Chambers told President Barack Obama that reports of the NSA putting surveillance tools in U.S.-made networking gear could hurt sales. Microsoft, Hewlett-Packard and other companies have also warned spying jitters could slow the uptake of new technologies such as cloud computing. The revelations are making some enterprises more careful about cloud deployments but hasn't deterred them from taking that path, CIOs said earlier this year.